Tharman Shanmugaratnam
Singapore
“EDB conducts regular reviews to GIP to ensure its effectiveness in attracting only top-tier business leaders who are interested to drive the growth of their businesses and investments from Singapore.”
“MAS may vary the size of the additional capital requirement imposed on the bank and take other regulatory actions depending on the outcome of ongoing reviews. MAS requires all retail banks in Singapore to ensure that their mission critical systems supporting digital banking are resilient.”
“This question will be answered in the reply to Dr Tan Wu Meng's Parliamentary Question filed for tomorrow's Sitting. [Please refer to "Probe into Recent Disruptions of DBS' Digital Bank and Physical ATM Services and Preventive Measures Implemented", Official Report, 5 July 2023, Vol 95, Issue 107, Written Answers to Questions for Oral Ans…”
“Borrowing from the banks is one of the ways in which MAS carries out MMOs to soak up such excess liquidity. Like other central banks, MAS does this daily through an auction system, enabling MAS to withdraw liquidity through the Primary Dealers that submit the most competitive prices.”
“To mitigate consumer over-indebtedness, the Monetary Authority of Singapore (MAS) requires financial institutions (FIs) to implement a range of safeguards when extending mortgage loans and unsecured credit.”
“The Monetary Authority of Singapore imposes on external asset managers the same stringent regulatory standards for anti-money laundering and countering the financing of terrorism that it imposes on banks.”
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“On that front, we have spared no efforts, first, in trying to tame the cycle, which we are achieving by boosting supply of HDB flats and through our additional buyer's and seller's stamp duties. All the measures we have taken to tame the cycle are working and are working better than in Hong Kong or some other places. More importantly, there have also been enhancements to housing grants – the HDB and Build-To-Order (BTO) grants. What we are able to achieve for young couples in Singapore today is unmatched by any other leading city in Asia. We know about Hong Kong, extremely high housing prices. Likewise, in Shanghai, Beijing, Seoul, Taipei, even Sydney and Melbourne – if you look at the income of the average young couple, compared to the price of a home that they want to move into, homes are more within the reach of our young than they are in any other leading Asian city. That is home ownership. Thirdly, what we are doing for those in working age. I am listing this in a little bit of detail but it is worth reminding ourselves as to how our social programmes add up and how we have been making deliberate moves over the last seven to eight years: what we are doing Page: 38 for people in their working age. SkillsFuture is a major investment and I have spoken about it. At its heart, it is not an economic programme. At its heart, it is about helping every individual push their potential through life. Not just what you do in school. Keep discovering and pushing your potential. Everyone has a strength, although we may not figure it out during our school years. Everyone has a strength and it is never too late in life to identify your strengths, identify your interest, and push your potential. It is never too late to learn.”
“Secondly, we have enhanced affordability across the system, from preschool all the way up to the tertiary level. We know about the kindergarten and childcare subsidies. For low- Page: 37 income families, they pay as little as $3 a month for childcare, and $1 a month for kindergarten. Across the system, we have also enhanced subsidies for the middle-income group. I spoke about this in the Budget. This is especially so in tertiary education. A significant shift that began a few years ago was to enhance bursaries and other forms of support for the middle-income group in tertiary education. Thirdly, it is about the pathways. By creating more diverse pathways to cater to every talent and inclination, and even different learning styles, we are also trying to promote social mobility. People have different strengths, different interests and by providing more diverse pathways, we maximise our chances of social mobility. That has been true in the school system but especially true at the tertiary level. The strengthening of the applied pathway is a critical route to social mobility. That is education – a major set of initiatives. The second major initiative that we have taken is to promote home ownership, particularly, by helping the lower- and middle-income groups. I am not going into details because Members know the details. Housing prices are not like what they were 40 or 50 years ago. That is, indeed, why the older generation today is sitting on substantial housing assets and equity in their homes. Prices are not like what they were even 30 years ago. What is critical is to help young couples today, once they are ready to set up a family, to own a home.”
“But even for this younger group, 14% end up in the top 20%. A relatively fluid society. We know it will get more difficult. With each decade, it gets more difficult as society gets more settled. We will not evade the problems faced in the advanced societies; the natural workings of societies exist. So, we have to work harder at it, and that means, as Dr Lim Wee Kiak had emphasised, starting earlier. Finding every way to help every kid who has a weak start to gain confidence and to get a strong start. We are investing very heavily in pre-school education for this reason and we are doing a lot in our primary school years. Preschool education – it is well-known. But let me remind Members that when we add up what we are doing for students with a weak start in primary school, we are now spending 2.5 times more in real terms, compared to just five years ago. That is, investment in teachers, programmes to help them develop stronger numeracy and literacy skills, starting in Primary 1 and 2, and working our way up. A very significant initiative. We have to intervene earlier, intervene more strongly, but find the best and most creative ways to help children gain confidence and overcome early deficits. We are also doing more for special needs students. Our spending on students in our special education (SPED) schools has increased over the last five years by 50%. It was already much higher than for students in a regular school and we have increased it further by 50% in real terms. We have been strengthening the SPED curriculum, helping to train up the teachers. MOE is funding professional development of the teachers in our SPED schools. We are intervening earlier and trying to intervene better.”
“Everyone else in society is trying to do as best for their kids, as they have always done, but, for some reason, those at the top are putting even more effort into helping their kids succeed – starting very early and through life. Those are the natural workings of society. We cannot help those natural workings of society; they are true everywhere in the world. But we want to give the best chance for someone who starts off with a low-income background or middle-income background to move up and make sure this remains a fluid society. Now, we will look at the data. If you look at the US, for those who start off from parents who were within the bottom 20%, only 7.5% of them – or about one in 14 – make it into the top 20%. If everything is equal, 20% of them will be in the top 20%. But, in fact, only 7.5% make it to the top 20% of their cohort. This is now widely acknowledged in the US. They used to think of themselves as a place with considerably more mobility than Europe, but actually, Page: 36 it has not been the case for decades. The UK is not very different, very little mobility. Poverty today is poverty tomorrow, it is entrenched. The Scandinavian economies are somewhat better. About 10% to 12% of those who start off from parents in the lower- income group end up in the top quintile, the top 20%. Canada is doing much better than the US. They are located side by side, but Canada has got a different system, less entrenched social barriers and they are doing somewhat better. In Singapore, for those who start off with parents in the bottom 20%, 14% of them end up in the top 20% of their peers. This is a relatively young group that I am showing – those in their mid-20s to early 30s. If I were to show you the older generation, we know the story – even more fluid.”
“Let me describe the major steps we are taking and how they add up to this new social compact. First, we are intervening earlier in life: investing more in our young so as to preserve and encourage social mobility because that has to be part of our Singapore identity. It is a challenge all over the world. Social mobility is the defining challenge in every advanced country today. The slowdown and the low level of social mobility, almost irrespective of which of these countries you look at, including the Scandinavian countries. We are fortunate that Singapore has so far done relatively well. It is still a more fluid society than most. I can show Members a slide. [Please refer to Annex 1] What this slide looks at is people who start off with low-income family backgrounds, and we look at what happens to them once they have finished education, entered work and are well into their working lives. Where did they end up? If everything was equal – in other words, if we all had equal abilities and if backgrounds and everything associated with our backgrounds played no role in what happens in life – then, the chance of you ending up in the bottom 20%, the next 20%, the middle 20% or the top 20%, will be equal. Wherever you start, 20% will end up in each quintile of society. Everything equal. But everything is not equal: there is the "lottery of birth" and, in every society, your background is associated not just with your abilities, but the culture around your background. What has been seen in most advanced societies, for reasons that are not fully understood, is that in the last 20 years especially, people who are better off are not just giving more resources to their kids, they are also putting a lot more effort and time with their kids.”
“We are embarking on a major new phase in developing our people. It involves some experimentation. It involves learning as we go along, but let us do it with the right spirit. As Mr Lim Swee Say says, everyone plays a part in this. You just need the mindset of embracing the future. We all have to embrace the future. And I think this will, in time to come, prove to be a transformative force in our society. Let me now move on to a second major theme, which is that of building a fair and inclusive society. We have embarked on major moves to build a more inclusive society and mitigate inequalities. It is not a recent shift; it is not a sudden shift. It started in a major way in 2007 and, since then, step by step, year by year, we have made enhancements in education, housing, healthcare and retirement. A deliberate tilt to support our lower- and middle-income groups, step by step. And if you look at each of our Budgets, if you look at the philosophy articulated in National Day Rally speeches by the Prime Minister, this is a shift that we have been working at progressively year by year over the last seven to eight years. What it boils down to is that we are providing more active support for Singaporeans at each stage of life: when you are young, when you are in your working years, as you raise your family and when we all retire and get older. Very importantly, we are building a social compact that is not only about stronger collective responsibility, but which seeks to encourage personal and family responsibility. I will come back to this later. That is at the heart of it. We are building a social compact that is not just about stronger collective Page: 35 responsibility, but seeks to encourage personal and family responsibility.”
“In particular, the suggestion that we should not just develop a landscape of offerings, but should actually work with groups of Singaporeans to develop offerings that meet their needs. So, it is not just about the landscape of offerings on the one side and firms on the Page: 34 other. You have got to help groups of Singaporeans to meet their needs – mid-career PMEs, our homemakers, our low-income workers, Singaporeans aspiring for leadership positions. Singaporeans who really need, in some cases, hand-holding; in some cases, some customisation within this landscape. And I think that is a very exciting opportunity to develop intermediaries and mentors, use our trade associations and have individuals who are also passionate about this to come forward and work with the groups of people, including our homemakers, as was emphasised, who do want to return to work for some period of time, part-time or full-time. We will place great emphasis on developing quality offerings. This has been emphasised by everyone, in particular, by Ms Denise Phua and Ms Foo Mee Har. We studied the experience in some other countries. The UK did experiment with individual learning accounts more than a decade ago. They faced problems because of a lack of quality assurance and they did not place enough emphasis on developing the supply side, developing the training landscape that was relevant to the needs of employers and individuals. It is no point just creating an account where you put money into people's account. You need to ensure quality. You need to assure people of quality and you need to ensure relevance to jobs and individuals. And that is what our primary focus will be about. So, SkillsFuture, frankly, will itself be a learning journey.”
“Industry by industry, sub-industry by sub-industry, we will work with TACs and clusters of companies to develop Singaporeans to develop talent. Develop courses that really suit the needs of the industry – short courses, modular courses, helping workers take advantage of new technologies – and develop training options that are meaningful to the individuals, meaningful to Singapore. And a very important part of this initiative of helping SMEs will be to develop a pool of mentors who work with specific industries and firms to help them. Because, as we noted, SMEs, on their own, will find it difficult to train up their people and take full advantage of SkillsFuture. So, TACs and a pool of mentors will help our SMEs. There are already examples of how this can be done. The furniture industry is one of them. The Singapore Furniture Industry Council has collaborated with NTUC's e2i and WDA to launch the Creative Craftsmen Entrepreneurship Programme, combining on-the-job training with training at the Institute to develop a local pool of skilled local craftsmen. Good example. It is when some TACs take the lead that I think others will begin to move and they will know that you provide very strong support as the Government for the TACs to take the initiative. SkillsFuture was supported by everyone who spoke. I am glad that the Workers' Party, too, joined in support of this whole initiative. There were useful suggestions on how we should go about it and, in particular, I would like to highlight the suggestions that several Members made – Ms Jessica Tan, Ms Irene Ng, Mr Patrick Tay, Dr Intan, Mr David Ong, Mr Ang Hin Kee, Er Dr Lee Bee Wah. I am sure I missed out some other names.”
“Entrepreneurs have to rise to the occasion. Mr Thomas Chua asked about the numbers. Small numbers have been taking advantage of these schemes. If you look at our Innovation and Capability Vouchers which help small companies to take incremental but significant steps, since 2012, we had about 16,000 vouchers awarded, 90% of which going to very small businesses. If you look at IDA's iSPRINT scheme, since 2012, about 7,000 SMEs have been implementing new IT solutions. IDA has also been promoting sectoral platforms and we have 46 sectoral platforms taking root and which will yield positive results in time to come, I am sure. Page: 33 SPRING's Capability Development Scheme, which is one step up, higher than the Innovation and Capability Vouchers – we have 2,000 projects supported in the past three years. Again, it will take time for it to move the needle at a broader level. And as I announced in the Budget, we are now introducing a lower tier of support that will be granted much more easily so that we multiply the 2,000 figure. So, we are making some shifts in our approach towards focusing our innovation and breakthroughs whilst retaining a base level of support for all companies to get onto the basic level of productivity initiatives. We are shifting emphasis, and I am glad that everyone who spoke supported that shift. But very importantly, we have got to help our small and medium enterprises (SMEs) take advantage of SkillsFuture. This is an opportunity for our trade associations and chambers, or TACs, to strengthen themselves and work with their members. And the Government will work very closely with our TACs on this. SkillsFuture is a real opportunity.”
“Because we have, as part of our social objectives, to try and make it as friendly as possible an economic environment for anyone who wants to join the workforce and contribute to the family. And I think that is the right balance that we have taken. But we do have to ensure that our SME sector, five and 10 years from now, is a vibrant one. We will not be able to keep all our SMEs, but we want to have a critical mass of SMEs in every sector of the economy. That is Singaporeans – they are part of our society, not just our economy – we want them to be there in the future Singapore economy. Innovative SMEs, expanding abroad and even where, in the domestic market, finding a new way of doing business or bringing in new ideas to the market. And it can be done. We have seen leaders already amongst our SMEs in every field that are breaking the mould. It can be done. We are sparing no resources in helping our SMEs. And although we have concerns about how many agencies we have, how many schemes we have, frankly, these are second order issues. It just depends on the entrepreneurs. If they are willing to take advantage of schemes, the schemes are there. They are more generous than in any other economy I know of, when you add up all our schemes – tax incentives, focused as well as broad-based, like the Productivity and Innovation Credit (PIC); grant schemes through Standards, Productivity and Innovation Board (SPRING), Infocomm Development Authority (IDA), Media Development Authority (MDA); and the other schemes. When you add them all up together, it is a very generous set of supports. Please come and take advantage of them. And the Government will work as closely as possible with our trade associations and chambers to help more companies take advantage of our schemes.”
“It takes time to reengineer a business, some time to switch to an entirely new business model and to train up our people. It takes time, but that is the approach we have taken. Gradual tightening so as to allow the market to work, but very strong support for firms that want to upgrade and do something about it. And we have more than flowed back to the business sector the additional foreign worker levies that we collected. The reason why we have taken this approach and not the harsher approach of simply allowing market forces to work in the face of a very tight labour market is because shock treatment does not just weed out the weakest players. It does not just weed out unviable businesses. It has a way of weeding out good businesses as well. It happens in every crisis, in every economy. When you go through a deep crisis, you lose many good businesses, including very promising entrepreneurs. So, we have taken this phased approach because we are not an economy in crisis, we can afford to take this phased approach. Page: 32 Secondly, we have not wanted to impose a large cost on our workers. That is the second reason why we have taken this phased approach. Indeed, in the last few years, you have seen a very significant increase in labour force participation amongst older workers as well as people returning to the workforce, particularly women returning to the workforce. As Ms Foo Mee Har noted, I think quite thoughtfully, when workers who have been out of the workforce for some time or who have lower skills enter the workforce, it does not immediately help productivity. It takes time to train our people. And that is another reason why productivity growth has been hampered.”
“We, therefore, have two basic approaches that we can take in attempting to move from one state of the economy to the next state. Two basic approaches that we can take in transition. One is to find a way to subsidise business costs across the board. Subsidise rental cost, subsidise labour cost, subsidise business cost across the board, because, actually, it is an across-the-board situation. It is a fundamental constraint in resources pitched against increasing demand for resources. It is not about one firm or the other, or one sector against another. So, find a way in which the Government uses taxpayers' money to subsidise across the board to reduce business cost. That is one way. The other way, as Assoc Prof Randolph Tan and a few others mentioned, is to withdraw support and accelerate the process of restructuring by letting market forces take charge, letting the market sort out more quickly winners from losers. That is another way. And it is not a crazy idea to accelerate restructuring by letting market forces take charge. We have not chosen either approach. We have chosen an approach that is the middle path. As Mr Ong Teng Koon and others have pointed out, a phased tightening of our foreign worker policies, starting in 2010, year by year, always giving lead time for workers, and it has been quite a gradual phasing in. If we look at it over the five years as a whole, it is a significant tightening, but it has been phased in. And very importantly, we have not just collected high foreign worker levies but we have flowed it back to companies. Flowed it back to companies that are taking some initiatives to upgrade, invest, improve processes so that they are prepared for higher productivity in the future. As Assoc Prof Randolph Tan and others know, the process takes time.”
“Mr Yeo Guat Kwang, Mr Gan Thiam Poh and several Members highlighted this constant problem of business cost increases at a time when revenues are not growing very rapidly. It is a real problem. The fundamental reason for business costs being high lies in demand and supply. That is the fundamental reason. We are a supply-constrained economy. But demand by businesses for land, labour and all sorts of resources remains high. There is some positive in that; there is some positive in an environment where businesses are still trying to do business, trying to expand, need more workers, space and resources. It is not an economy in crisis. Over the last five years, the number of new firms formed each year minus those that exited – net new firm formation – was 20,000 per year. Twenty thousand firms formed each year, minus those that exited. That is more than twice the preceding five years. During these five years – when we had sought to restructure our economy and were grappling with the shortages we face in manpower and the increasing constraints of land – we have seen a significant increase in the number of firms being formed across every sector. Even in sectors like the food services sector, hotel services sector, we have seen the same phenomenon. In the food and accommodation sector, the average number of new firms, minus those that exited, was nearly 1,000 per year, 50% higher than in the preceding five years. But revenues, overall, are not growing more rapidly. They are not growing by 50% at all. We all know that. So, it is a question of revenue growth not being unusually buoyant but demand for resources is growing. And in that situation of demand and supply, business costs Page: 31 go up. That is a fundamental reason.”
“Mdm Speaker, let me first, thank Members of the House for the thoughtful and valuable views that everyone has made over the course of the last two days. Members have spoken about each of the major thrusts in the Budget, both by providing perspectives of how we should go about things, underlining the values that should underpin our efforts and making many specific suggestions on how we should implement our schemes – how we should learn as we go along and improve as we implement our schemes. So, it has been a very useful debate. Many of the specific issues, as usual, will be taken up during the Committee of Supply (COS) by the respective Ministers. I will focus on three main issues today. Page: 30 First, quite briefly, I will respond to some of the perspectives provided during the debate on economic restructuring and, in particular, how we have got to help uplift our SMEs, so that the future – when we talk about the next frontier of our economy – is not just a future of technology and skills but a future that contains a vibrant SME sector as part of our society. Secondly, I will talk about our approach towards building a fair and inclusive society. Thirdly, very importantly, I will talk about our ability to sustain what we are doing: how do we sustain a fair and inclusive system well beyond the current generation of Singaporeans? Let me start with restructuring. The issues that came up in the debate are not new. If you look at the debates of the last few years, you will find similar issues coming up and they illustrate inherent tensions in restructuring our economy, inherent tensions in moving from one state of economy to a new state of economy, with a transition in between that is an inherently difficult transition. Mr Inderjit Singh spoke about high business costs.”
“Mdm Speaker, may I seek your consent to move, "That the debate be now adjourned"?”
“Mr Deputy Speaker, may I seek your consent to move, "That the debate be now adjourned."”
“Unfortunately, he was seriously injured in a road accident. He was on a motorcycle and it was a bad accident which left him with a permanent limp. He decided to become a swimming coach, starting at the old Royal Naval Officers' Club in Woodlands in 1964. Later, he moved to Farrer Park Swimming Pool and, then, to Tanah Merah Country Club. He has coached countless young Singaporeans over the years. Some have gone on to become exceptional swimmers. One of them was Joseph Schooling. Vincent was Joseph's first swimming coach from age four to nine. He taught him when he was a child, from basics. Vincent would often dive underwater to watch Joseph and help him improve his technique. He knew Joseph had something and he put special efforts into coaching him. So, when Joseph's current coach Eddie Reese – former coach of the US Men's Olympic Swimming Team, in fact, in two successive Olympics – recently described Joseph as Page: 65 "the closest human to a dolphin under water", Vincent knew how it all began. That is really the spirit of what we are creating in Singapore. Finding something that we think we can be good at, persevering over the years and taking pride in it, and passing the passion on to the next generation, so that we keep moving up. And we all move up. Mdm Speaker, I beg to move. [Applause.]”
“When we put it all together, this change – which takes effect in 2017 – as well as including Temasek in the NIR framework, will provide additional revenues equal to about 1% Page: 64 of GDP annually for the Budget over the next five years. Based on current projections, the revenue measures we have undertaken will provide sufficiently for the increased spending needs we have planned for till the end of this decade. This must remain our approach – ensuring that we always have the resources to meet our commitments. For FY2015, the Overall Budget Balance is projected to be a deficit of $6.7 billion, or 1.7% of GDP. However, this deficit comes about mainly because of the $6 billion we are setting aside for future investments: in particular, $3 billion into the Changi Airport Development Fund and the significant top-ups for the Special Employment Credit Fund, National Productivity Fund and the National Research Fund that I spoke about earlier. If we were to exclude these funds being set aside for future investments, the Budget for FY2015 will, in fact, be quite close to balance. We have sufficient surpluses from previous years of this term of Government to enable us to invest ahead and fund the overall deficit in FY2015. There is no draw on past reserves. Mdm Speaker, let me conclude briefly by talking about the spirit of what we are seeking to achieve as a nation. Vincent Poon, 69, taught himself to swim when he was six years old, at Singapore's first public pool in Singapore, which was the old Mount Emily swimming pool. When he went to Beatty Secondary School, he became the swimming team captain. Later, he received a long-distance swimming award for swimming more than 20km non-stop over 12 hours. Vincent was also a serious judoka, obtaining a Black Belt – Second Dan.”
“Singapore has other key strengths including our culturally diverse and cohesive society, a family-friendly environment, clean air especially compared to other Asian cities and a world-class healthcare system. But it would be naive to think that we can keep raising tax rates without affecting our competitiveness. We must remain an attractive place for world-class teams to be in Singapore with Singaporeans at the core and to keep our place in the world. This will keep our economy vibrant and retain talent, so that all can contribute to building a better Page: 63 Singapore. Let me now illustrate the impact of the tax changes. It will affect the top 5% of income earners, who earn at least $160,000 a year, but the increases are largest for the highest income earners. This is because our marginal income tax rates rise significantly towards the top end of incomes. [Please refer to Table 5.] For someone earning $250,000 a year – that is within the top 5% quite comfortably – his effective tax rate will increase from 8.3% to 8.5%, with additional tax payable of $400. So, it is not a significant impact for someone who is earning $250,000 a year. A higher-income earner with income of $800,000 will see his effective tax rate increase from 16% to 17.4%, with additional tax payable of about $11,000. A top income earner with income of $1.5 million will see his effective tax rate increase from 17.9% to 19.5%, which leads to an increase in tax of about $25,000. [Please refer to Annex A-6.] The change to the top personal income tax rates is expected to raise additional revenue of $400 million a year when it comes into effect.”
“In Budget 2011, we reduced personal income taxes significantly for the middle-income, without changing the tax rates for high-income earners. We have also introduced and enhanced negative income taxes for our lower-income groups. Workfare, which is a negative income tax, was introduced in 2007 and enhanced in 2012. Likewise, this year we will be introducing Silver Support, also a negative income tax, for those in retirement who had low incomes. It is fair that this enhanced support for those with low incomes should come chiefly from revenues contributed by the high-income group. Those with higher incomes have also been seeing stronger growth in incomes than the average Singaporean in recent years. We have considered this carefully, and concluded that there is a need to increase slightly our top marginal income tax rate. I will raise the marginal tax rates that affect the top 5% of our income earners. I will raise the top marginal rate by two percentage points, from 20% to 22% for the highest income earners, those with a chargeable income of above $320,000. I will also make smaller adjustments that will raise income tax for the others in the top 5%. It will apply starting with income earned in 2016 and on taxes to be paid in 2017. This tax increase for high-income earners will enhance progressivity and strengthen future revenues. This is a calibrated move. We have assessed that it should not significantly dent Singapore's competitiveness. We cannot take tax competitiveness lightly. The international competition for talent is real, for both Singaporeans and foreigners. Many Singaporean professionals are in fact working abroad, such as in Hong Kong. Of course, tax rates are not the only way we stay competitive.”
“In other words, when we add up all our taxes – GST, income, property and other taxes – and compare them to benefits received, the low-income group gets more benefits than the taxes they pay, while the high income tax pays more taxes than benefits received. So, a significant net transfer to the lower-income group, coming out of the significant net contribution by the higher-income group. I have spoken in the past few years about the need to build up our revenues, but to do so in a way that keeps our system of taxes and benefits as a whole progressive. The system – GST, income tax, property taxes, everything added together – has to be fair and progressive. Our first move was to make our property tax regime more progressive. In Budget 2010, we moved from a flat owner-occupier tax rate for residential properties and introduced progressive tax rates which tax properties with higher annual values more. In Budget 2013, to further increase progressivity, we added more tiers of tax rates and we also introduced progressive tax rates for non-owner occupied residential properties. These changes were made over two years, with the latest tax rate schedule taking effect from 1 January 2015. I will now make a further adjustment in our tax system, which is to raise the personal income tax rates of our top income earners. It will take effect in YA 2017. Page: 62 We have a competitive personal income tax regime, much lower than most countries. It is also, as I have explained, a progressive system. The top 10% of our taxpayers pay slightly over 80% of personal income taxes. Nevertheless, we have been making our income tax regime more progressive in recent years.”
“Keeping our economic vitality is central to our social strategies, so that we have fruits to redistribute and share to make ours an inclusive society. Page: 61 Second, we should have a fair and equitable system of taxes and benefits. It means that everyone has to pay some tax, and everyone is, hence, contributing to the public services and the investments in our people, heartlands and economic future that we all benefit from. Everyone pays some taxes for these common benefits. The majority of Singaporeans do not pay income tax, but they pay GST. However, while everyone contributes something for a better Singapore, those who are better-off should contribute more. Third, we have to keep the tax burden on the middle-income low, so that they get to keep what they earn, as much as possible. In several advanced countries, taxes on the middle-income are much higher than in Singapore, in order to fund higher social benefits: not just for the lower-income but, often, for everyone else, including the upper-middle income and the rich. Our philosophy is to keep the burden on the middle-income low, and target benefits at the most important needs of the poor and middle-income groups. Taken overall, this is a better deal for middle-income households. Hence, we have designed our system such that we have lower overall taxes than most countries, but nevertheless maintain a highly progressive regime. The higher-income group makes a significant net contribution into the system, which enables the lower-income group in turn to get significantly more benefits than the taxes they pay.”
“We are now ready for our spending rule to be based on the total expected returns of all three investment entities, including Temasek. We have worked with Temasek to develop an approach to project its expected long-term returns, taking into account the nature of its investment portfolio, although its equity-only portfolio will continue to be more volatile and subject to more pronounced investment cycles than the MAS and GIC portfolios. Including Temasek in the NIR framework would enable us to spend based on its total expected returns, including realised and unrealised capital gains, and not just actual dividends paid by Temasek to the Government. Our fiscal needs have also grown since 2008. When we amended the Constitution then, we were able to derive significantly more resources for our spending on investments in education, learning and training, as well as innovation and R&D for the future. It is now timely that we have this further enhancement to include the expected returns of Temasek in the NIR framework. The move will bolster our fiscal resources at a time when we have to fund long-term critical infrastructure and develop the human talent and capabilities for the future. These investments will help us to secure our future. This NIR framework continues to ensure that we spend from our reserves in a sustainable manner, so as to benefit both current and future generations. We aim to present a Constitution Amendment Bill to Parliament later this year for this purpose. On top of deriving these additional resources, we have to review our domestic taxes, so that we bolster our fiscal position for the medium to long term. Our philosophy is, first, to sustain a vibrant economy that will help to improve Singaporeans' lives.”
“However, Government spending will inevitably rise. We project overall spending to reach about 19% to 19.5% of GDP on average over the next five years. This is about 1% of GDP higher than the revenues we have today. It is, therefore, necessary that we take steps now to strengthen future revenues, to put Singapore on a firm fiscal footing for the rest of this decade. The first enhancement we are making is within the Net Investment Returns or NIR framework. The NIR framework was implemented in 2009, as members would recall. Under the framework, the Government is allowed to spend up to 50% of the expected long-term real returns on its net assets managed by MAS and GIC. It was a significant change from the old Net Investment Income framework, under which the Government could only spend from actual investment income, comprising dividends and interest. In contrast, the new NIR framework allows the Government to spend based on expected long-term returns, including both realised and unrealised capital gains. Page: 60 The NIR framework was intended to be eventually applied to the expected returns of all three investment entities – GIC, MAS and Temasek. We proceeded with GIC and MAS first. We had deferred Temasek's inclusion in the NIR framework in 2008 and indicated that we would review this after some years. There were two reasons. First, there were no established methodologies for projecting the long-term expected real return on its portfolio, given its investment approach of taking concentrated stakes and making direct investments. Second, Temasek's investment strategy was still evolving, having begun to invest in more geographies and sectors since 2002.”
“As the Senior Minister of State for Transport has just stated this afternoon, about $14 billion has been deployed to the public transport system over the past five years and another $26 billion has been committed for the next five years. Third, the development of Changi Airport T5. This will be a major outlay for this Government over the next 10 to 15 years. It is right and prudent to set aside monies today Page: 59 for this large investment, while we have the resources to do so. We will, therefore, set up a new Changi Airport Development Fund and make an initial injection of $3 billion into the fund. This can be topped up subsequently when our fiscal position allows. The total cost of developing T5 is much larger than $3 billion. It is a very significant sum. Our spending on healthcare, public transport and Changi Airport will be complemented by other essential expenditures, such as enhanced domestic security and the rejuvenation of our neighbourhoods. We are also spending more through education and SkillsFuture to build the human capabilities that we need for the future, and to develop every Singaporean's potential. Together these initiatives will enhance the quality of life in Singapore and develop sustainable competitive strengths for our economy and jobs. We must ensure that we are able to finance these growing expenditures. But equally important, we must ensure that we control costs in the years to come. Last year, I spoke about how the Government will seek to control healthcare costs. As we embark on large infrastructural projects, we are placing great emphasis on optimising project design and cost efficiency. Overall, we must spend judiciously, achieving value-for-money and providing subsidies to Singaporeans in a fair and targeted manner.”
“Besides what I have talked about in education and the reduction of the Foreign Domestic Worker Levy, they will receive support for cost of living from the income tax and S&CC rebates. Fifth, many families will also benefit from the enhanced support for our seniors, through the extra GSTV – Seniors' Bonuses this year. Some of their parents may also benefit from the new Silver Support Scheme that starts early next year. Mdm Speaker, we expect Government expenditure to increase over the medium to long term. It will be driven mainly by three areas. First, healthcare. I spoke earlier of our significant expansion of the healthcare infrastructure, such as the increase in public hospital, community hospital and nursing home capacity by 2020. We have also enhanced subsidies at Specialist Outpatient Clinics and Intermediate- and Long-term Care. We will now be extending significant subsidies for low- and middle-income Singaporeans for MediShield Life premiums. Operating expenditures, quite apart from development expenditures, will increase and they will increase, especially as our population gets older and as healthcare consumption goes up. While we had set aside monies last year to fund the full projected cost of the Pioneer Generation Package, the underlying healthcare subsidies received by all Singaporeans will need to be funded from annual budgets. Altogether, healthcare spending is expected to rise from over $9 billion in 2015 to over $13 billion in 2020. It will continue to increase beyond this decade. Second, improvements to our public transport.”
“The savings will be much larger than the rise in petrol duties if the same family also drives a car. To give you an example, even if it is a 2,000-cc car, the extra cost will be about $360 a year on average, which is half the savings obtained from the reduction in the maid levy. Let me illustrate how our policies will add up for Singaporean families. The Annex provides examples [Please refer to Annex B-3], but I will summarise here the additional support that we are providing for our middle-income families, to help them meet their aspirations and deal with the cost of living. First, we are supporting families with children and elderly in the following ways: (a) Expanding affordable and quality childcare through our schemes for Anchor Operators and new Partner Operators; (b) Lowering the cost of schooling by removing examination fees permanently and through additional top-ups to CDA, Edusave and PSEA; and (c) Halving the foreign domestic worker concessionary levy from now on. Second, besides families with children and elderly, we are providing stronger support for those who have started working or are in the middle of their careers to pick up new or deeper skills and progress in their careers. They will enjoy SkillsFuture Credits, the new SkillsFuture Awards and significantly enhanced subsidies for educational and training Page: 58 courses. Third, we are also helping them enhance their savings for retirement, through the increase in the CPF salary ceiling, higher contribution rates when they are in their 50s, and Extra Interest in the later years. Fourth, they will receive support for costs of living.”
“] Related to this, we will enhance the Early Turnover Scheme to further encourage the replacement of older commercial vehicles with greener vehicles that meet higher emission standards from August 2015. The Minister for the Environment and Water Resources will provide more details at the Committee of Supply. To encourage less car usage and reduce carbon emissions, I will raise petrol duty rates which have remained unchanged since 2003. The duty rates for premium grade petrol will be increased by $0.20 per litre and intermediate grade petrol by $0.15 per litre. With falling oil prices, pump prices after the petrol duty changes would remain lower than the levels seen in the last two and a half years. These changes will take effect today and yield about $177 million a year. Page: 57 To ease the transition to the higher petrol duties, I will provide a one-year road tax rebate of 20% for cars, 60% for motorcycles and 100% for the small number of commercial vehicles using petrol. The road tax rebate will offset about two-thirds of the impact of the petrol duty change on intermediate grade petrol for a typical car. The one-year road tax rebate will cost the Government $144 million. We will reduce the foreign domestic worker concessionary levy from $120 per month to $60 per month. We will also extend the concessionary levy to households with children aged below 16, up from below 12 today. These changes will provide greater support for middle-income families who are taking care of their children and elderly parents. The reduction will take effect from 1 May 2015 and will benefit 144,500 households. This will cost about $125 million per year. The annual savings from the reduced maid levy amount to $720.”
“To provide further support for cost of living, we will provide one to three months of Service & Conservancy Charges or S&CC rebates. One- and 2-room HDB households will receive a total of three months of rebates for this year, while 3- and 4-room households will Page: 56 receive two months of rebates. This will cost the Government $80 million. To help middle-income taxpayers, I will provide a Personal Income Tax Rebate of 50%. I have set the cap at $1,000 so as to ensure that the benefits go mainly to the middle- and upper-middle income groups. This will be for YA 2015; in other words, for income earned in 2014. One-and-a-half million individuals will benefit from the tax rebate. It will cost the Government $717 million. In this Budget, I will make a few changes to our indirect taxes to support two objectives. First, I will take further steps to reduce vehicular carbon emissions and promote a greener living environment. Second, I will provide support for middle-income families in their cost of living by reducing the foreign domestic worker concessionary levy. So, there is some pain, but there will be some gain. In 2013, we introduced the Carbon Emissions-based Vehicle Scheme or CEVS to encourage the take-up of carbon-efficient vehicles. We are encouraged by the results after two years – over 65% of the cars registered in 2014 qualified for CEVS rebates whilst about 5% paid the surcharge. So, most people took the benefits by moving to more carbon-efficient cars and just 5% paid the surcharge. I will extend the CEVS for two years, from 1 July 2015 to 30 June 2017, with some refinements to encourage a further shift to greener cars. The details are in the Annex and will be discussed by the Minister for Transport at the Committee of Supply. [Please refer to Annex A-6.”
“This initiative will be extended to Polytechnics and ITEs, for which the Government will donate $150,000 and $250,000 respectively on behalf of each institution. We will provide in this Budget some additional support to help Singaporean families with their costs of living, besides the enhancement in educational subsidies and the top-ups that I have just spoken about. We will also take the opportunity to make several tax changes. The GST Voucher or GSTV – Cash is one component of the permanent GSTV scheme that we introduced in 2012. The other components are the GSTV – Medisave and GSTV – U-Save. Taken together, the GSTV ensures that the GST is not a burden for the lower-income group. To help lower-income households with costs of living, we will be increasing the quantum for GSTV – Cash by $50 across the board from 2015 onwards. [Please refer to Table 4.] This means that eligible individuals will receive up to $300 in GSTV – Cash. This will benefit 1.4 million Singaporeans. We will also provide our seniors aged 55 and above with a GSTV – Seniors' Bonus in 2015 to help them with their daily expenses. This will effectively double the GSTV – Cash that they usually receive. They will, therefore, get up to $600. They are effectively getting two GST – Cash Vouchers. Furthermore, for those aged 65 and above and living in HDB flats, we will give a further $300 this year. They will, therefore, get a total of $900. This will be helpful to these older seniors while we work out the details and implementation of the permanent Silver Support Page: 55 scheme, which will begin early next year. The additional payment in the meantime will cover a larger group than Silver Support. Taken together, these measures will cost the Government an additional $385 million in 2015.”
“Individual donations in 2014 reached an all-time high of $1.25 billion, or a 30% increase from 2008. Our enhanced tax incentives for donations have helped. In other words, the benefit has not gone to the donors, but it results in more donations. We recently announced an extension of our matching grant support for the Care & Share Movement till 31 March 2016 and the Government is providing an additional grant of $250 million. This doubles the total matching grant for Care & Share to $500 million. We will do more to encourage giving this year. We will increase the tax deduction from 250% to 300% for donations made in this Jubilee Year. We will also extend the 250% tax deduction for donations, which was to expire at the end of 2015, for another three years till the end of 2018. So, it is 300% for donations Page: 54 made this year and it is 250% for the next three years. Taken together with the Care & Share matching grant support, our measures effectively multiply every dollar that the community is giving. For every dollar that you donate in 2015, the Government is more than doubling it. We want to encourage the spirit of giving and to raise the awareness of community causes in our students from young. As part of SG50, schools will work with their students to identify suitable beneficiaries as part of values-in-action education. The idea is for them to choose IPC charities – not only to raise funds for them, but to do projects with them in the community. To support this effort, the Government will donate $20,000 to each school to use for the causes that they identify. "They" meaning, not the Principal, but the whole school community, the students.”
“This will cover public transport for all students, as well as school buses for Primary school students. We will increase the annual grants for school-based financial assistance for the next three years. This will give the School Advisory and Management Committee more resources to provide further targeted assistance to needy students. The initiatives will also be extended to our Special Education or SPED schools, appropriately adjusted to meet their specific needs. The Minister for Education will provide more details at the Committee of Supply. Our Self-Help Groups have been doing good work, helping children from needy families to progress. To enable them to do more, I will provide an additional $6 million grant to the Page: 53 Self-Help Groups over the next two years to support them as they expand their programmes and reach. Post-Secondary education. We will provide a top-up to the Post-Secondary Education Account or PSEA of Singaporeans aged 17 to 20 to assist households in saving for tertiary education. The majority will receive $500 in this top-up. [Please refer to Table 3.] These top-ups, too, are meaningful. For students from lower-income families entering Polytechnic in 2015, the PSEA top-up, together with existing bursaries, will offset a full year of the diploma course fee. For ITE students, the top-up will cover more than one year of course fees. The PSEA top-up will benefit 160,000 Singaporeans. All in all, these measures for students from the Primary to post-Secondary level will cost about $250 million over the next three years. On the occasion of our Jubilee Year, we should take the opportunity to engage in giving to the causes that we feel matter to us as Singaporeans. Charitable donations have risen significantly in recent years.”
“Those currently without CDAs can open accounts and receive the top-up. The majority of children will receive $600. [Please refer to Table 2.] For a middle-income household, the top-up of $600 is sufficient to cover more than a month of childcare costs after subsidies. The top-up will cost $126 million and benefit 230,000 children. Next, what happens after preschool, from Primary all the way to post-Secondary education? While education is already heavily subsidised for Singaporeans, we will provide Page: 52 further help with education costs. We will, henceforth, waive fees for national examinations for Singaporean students in Government-funded schools. Students and their families will save up to $900 for their national examinations from Primary school to pre-University. In addition, we will waive examination fees for Singaporeans enrolled full-time in our ITE and Polytechnics. We will provide a $150 top-up to the Edusave Accounts of Singaporean students aged seven to 16, on top of the annual contribution of up to $240. [Please refer to Annex B-2.] So, it is $150, on top of the regular Edusave contribution of $240. Students above the age of 16 who are still in Secondary school will also receive the top-up. These are meaningful top-ups. For example, the $390 that will go into a Secondary school student's account this year will cover most of the fees for a short Outward Bound Singapore course. This will benefit around 400,000 students. We will also enhance the MOE Financial Assistance Scheme or FAS. Students on the FAS currently do not pay school fees and standard miscellaneous fees, and benefit from free textbooks and uniforms. We will now include a transport subsidy that will cover at least half of students' transport costs.”
“In addition, as part of SG50, it provides strong encouragement for the spirit of giving in the community. We have put in place substantial and enhanced subsidies for families with pre-school children. Today, lower-income families pay as little as $3 per month for childcare and $1 per month for kindergarten. We have also created many more affordable and quality pre-school places by expanding the Anchor Operator (AOP) scheme. Page: 51 We will now introduce a new Partner Operator (POP) scheme to complement the AOP scheme. Childcare operators on the scheme will have to commit to keeping fees affordable, developing their teachers and enhancing quality. Parents will benefit from lower fees than those currently charged by the centres run by these Partner Operators, and from higher quality care. To illustrate, a household with median income whose child is enrolled in a centre with the median monthly fee of $900 today, currently pays $500 a month after receiving a subsidy of $400. This is the current situation. If the centre comes onto the POP scheme, the household will pay around $100 less and can look forward to quality improvements. Currently, the AOP scheme accounts for one-third of the preschool sector, comprising both childcare and kindergartens. Through a combination of the AOP scheme and the new POP scheme, we aim for about 50% of preschool children to benefit from enhanced Government support for more affordable and quality preschool by 2020. This is estimated to cost $250 million over five years. The Minister for Social and Family Development will provide more details at the Committee of Supply. In addition, we will help families pay for preschool fees through a top-up to the Child Development Accounts or CDAs of every Singaporean child aged six and below in 2015.”
“Often, the family, quite reasonably, prefers to keep the home, with the children choosing to support the parents instead. Silver Support is estimated to cost about $350 million in the first full year. Together with Workfare, the Government will be spending about $1 billion a year on this system of progressive social support. The costs will, however, rise in the next decade as more Singaporeans reach the age of 65, while many below 65 remain in the workforce and, hence, qualify for Workfare. So, the cost of Silver Support will rise, but it will be a while yet before the cost of Workfare comes down. We cannot rush the implementation of Silver Support. It is a major scheme for the long term and involves a large number of Singaporeans. We have to properly identify those who are eligible and develop the necessary systems to implement the scheme. What I have described are the basic parameters and I have given you the examples of senior Singaporeans who would qualify and explained how much Silver Support would comprise. The exact details will be released later. We have got to first develop the system, ensure we have the information needed and make sure that this is implemented well. The assessment for Silver Support will, however, be done automatically, so, there is no need for any application, just like Workfare, where there is no need for any application. MOM will be ready to implement Silver Support around the first quarter of 2016. MOM will provide the final details closer to implementation. In the interim, however, we will introduce an extra GSTV – Seniors' Bonus in 2015, for seniors aged 65 and above and who stay in HDB flats, which I will describe later. Budget 2015 also provides a package of support for families with children.”
“They should be able to receive up to $750 per person every three months, or $1,500 for the two of them together. That is equivalent to $500 each month for the couple. Another example is a lower-income retired couple who live in a 4-room flat. While 4-room flats are worth more, they may be staying with their children and grandchildren, and the household income per member may be low. They may each be able to receive $450 every quarter, or $900 for the couple together. That is the same as $300 each month for the couple. This is a low-income household. Overall, we expect about 150,000 of today's elderly to receive these Silver Support top-ups. Silver Support reflects the values we must preserve as an inclusive society. It is the fair thing to do: helping fellow citizens who end up with much less than others in their retirement years. Many would have contributed in their own way during their prime years, whether at work or at home raising the family. Silver Support also complements the other schemes we have introduced to help the elderly, particularly in healthcare assurance, as well as the array of voluntary and community initiatives that make us a caring and tightly-knit community. Page: 50 What Silver Support aims to do is to supplement incomes in a modest but meaningful way. It should not substitute for other sources of income. Many retirees get support from their children – and strong and caring family ties should remain part of our social ethic. It should remain part of our Singaporean ethic. Many can also choose to get cash by unlocking the value in their homes, such as by using the enhanced Lease Buyback Scheme or the Silver Housing Bonus, or by renting out a room or the whole flat.”
“For example, it would not be fair to look only at housing type to determine eligibility for Silver Support. Some seniors who live in larger flats have had low wages for most of their lives and, hence, limited savings, and may be living with children who themselves do not earn much. We should not rule them out of Silver Support. Page: 49 We expect that the majority of those living in 1- and 2-room flats will receive Silver Support, with a smaller proportion of those living in larger HDB flats qualifying. Those who have been homemakers for a good part of their lives and, hence, earned little, will qualify, if their families are not well off. Silver Support will be paid quarterly, similar to Workfare. It will provide a supplement of $300 to $750 every quarter for eligible seniors. So, the range is between $300 and $750, paid every three months, for those who qualify. The average recipient will get $600 every quarter. Silver Support recipients who live in smaller flats will receive more than those in larger flats. All the seniors who qualify for Silver Support will receive these supplements for life, as long as they remain eligible. Let me give two examples of Singaporeans who should benefit. The first is a retired couple living in a 2-room flat. The husband started out in the 1970s earning a fairly low wage of about $200. With consistent work and wage increases over the course of his working life, he could have contributed a total of about $50,000 to his CPF. Just looking at his total contributions coming out of his wages, he could have accumulated about $50,000 in his CPF. His current CPF balance would be lower, as he has probably tapped on his CPF to buy their flat. His wife was a homemaker for much of her life and has little CPF.”
“Silver Support will aim to support the bottom 20% of Singaporeans aged 65 and above, with a smaller degree of support extended to cover up to 30% of seniors. This is similar to how Workfare supports the bottom 20% to 30% of Singaporean wage-earners. Silver Support is, hence, not only for the neediest of our elderly. For the truly needy, who have no other source of support, we have the safety net of Public Assistance or PA. If a retired couple qualifies for PA, they can get $790 per month, plus free medical care. As Silver Support is for Singaporeans above age 65, many of whom may have retired, we cannot look solely at their wages today to determine if they qualify for Silver Support. This is unlike Workfare, which is based on the wages you earn. Silver Support is for those aged 65 and above, so, we cannot look at today's wages. To ensure that assistance goes to those with lesser means, we will, therefore, look at three factors in combination – their lifetime wages, the level of household support they have today, and the type of housing they live in. Lifetime wages – how much they earned during their working lives, as reflected in their total CPF contributions over the years. The CPF contributions reflect their wages. We will consider Singaporeans with lower total CPF contributions before they reach 55. Household support – Silver Support is aimed at the seniors who are in households with lower incomes. Housing type – we will extend Silver Support to those who are staying in 5-room HDB flats and smaller, but with more support for those in smaller flats. We cannot look at any one of these factors on its own. We cannot look at just lifetime wages, or just household incomes, or just what type of housing you are staying in.”
“Hence, given the 4% interest rate on Retirement Account balances, members with lower balances can earn 6% interest. [Please refer to Table 1.] So, to be clear, there is a 4% interest rate on Retirement Account balances. For the first 60,000, we already have a scheme of Extra Interest which adds 1% interest, and we will now introduce another 1% interest for the first $30,000. Around 60% of today's CPF members aged 55 and older would earn 6% on their retirement savings. This is because of this new interest for those aged above 55. And around 80% will earn at least 5%. It will encourage Singaporeans to retain savings in their CPF accounts, and make top-ups to the CPF accounts of family members. [Please refer to Annex B-1.] For a member with lower balance, the additional 1% Extra Interest for the first $30,000 amounts to about a 20% increase in his monthly payout, or about $40 more each month, for the rest of his life. For a member who sets aside the Basic Retirement Sum of $80,500 in 2016, his monthly payout will increase by about 6%. Mdm Speaker, I will now move on to the Silver Support Scheme. The Silver Support Scheme will be a new feature in our social security system. It is a permanent scheme for both Page: 48 today's seniors and those in the future. This is unlike the Pioneer Generation Package, which provided special recognition to a unique generation in today's elderly Singaporeans. Just as Workfare tops up wages of lower-income Singaporeans during the working years, Silver Support will add to incomes in retirement. Together, both constitute the fourth pillar of social security, as I had mentioned earlier. They will help mitigate life's inequalities.”
“[Please refer to Annex B-1.] The changes will take effect from 1 January 2016. The increase in employer contributions will go to the Special Account. The increase in employee contribution will go to the Ordinary Account, and can be used to help them service housing mortgages. I had earlier announced the Temporary Employment Credit or TEC for employers, for 2016 and 2017. The TEC will help to offset the impact of these CPF changes for employers. The Special Employment Credit or SEC provides employers with a wage offset for workers above the age of 50. To promote voluntary re-employment of older workers, we will provide employers with an additional SEC of up to 3% of wages for workers aged 65 and above in 2015. This is on top of the 8.5% wage offset that employers will receive in 2015. So, for workers aged 50 and above, there is already the SEC and, on top of that, there will be a 3% additional credit for workers aged 65 and above. The law already requires employers to re-employ eligible workers up to age 65. This measure will encourage employers to continue employing them beyond that age. The measure will cost about $50 million. I will also provide a $500 million top-up to the SEC Fund, to meet the broader funding needs of the SEC, which caters to workers aged above 50 until the scheme expires in 2016. The Minister for Manpower will elaborate on our measures to help older workers stay employable at the Committee of Supply. Page: 47 We will make the CPF system more progressive by paying an additional 1% Extra Interest on the first $30,000 of CPF balances from the age of 55. This will take effect from 1 January 2016. It builds on top of the existing 1% Extra Interest provided on the first $60,000 of balances.”
“They will supplement incomes and help mitigate inequalities throughout life. Let me start with the CPF enhancements. Both the NTUC and CPF Advisory Panel have proposed that the Government raise the CPF salary ceiling. We will increase the CPF salary ceiling from $5,000 to $6,000. Middle-income Singaporeans will be able to accumulate more CPF savings during their working years. The increase will benefit at least 544,000 CPF members. Based on the new salary ceiling, a 45-year-old worker who earns $6,000 or more today will save an additional $60,000 by the time he reaches 65. In line with the higher CPF salary ceiling, we will raise the contribution cap within the Supplementary Retirement Scheme, which offers tax incentives to encourage voluntary retirement savings to complement the CPF. [Please refer to Annex B-1.] Page: 46 Both changes will take effect from 1 January 2016. CPF contribution rates. In recent years, we have seen significantly improved employment of our older workers. Schemes such as the Special Employment Credit and Workfare Training Support have encouraged employers to hire older workers and invest in training them. We increased CPF contribution rates for older workers in the last few years. I will take the final step to restore the contribution rates for workers aged 50 to 55 to the same level as those for younger workers, as called for by the NTUC. The contribution rate for these workers will go up by 2 percentage points in 2016 – 1 percentage point from the employer and 1 percentage point from the employee. This is for workers aged 50 to 55. For workers aged 55 to 60, I will increase the contribution rate by 1 percentage point from employers. For workers aged 60 to 65, the contribution rate will go up by 0.5 percentage points from employers.”
“We are also sharing risks directly as fellow citizens, not just through Government redistribution, but through MediShield Life and CPF LIFE, where we are pooling risks to support one another in the face of life's uncertainties. Page: 45 Besides the four pillars of social security, we have enhanced the safety nets that help Singaporeans who fall on hard times. Through ComCare, we are providing families with greater assistance on the ground, on a discretionary basis, and through Medifund, we are helping poorer Singaporeans when they are unable to pay their bills even after subsidies. We are providing substantially greater support through ComCare and Medifund than we did even five years ago. We will now take additional steps to strengthen our social security system. The Government has accepted the CPF Advisory Panel's recent recommendations to provide CPF members with more flexibility and certainty. The Minister for Manpower will elaborate on these changes at the Committee of Supply. Budget 2015 will introduce further measures to strengthen savings and income in retirement. There are essentially two sets of measures. First, we will enhance the CPF system. We will increase CPF contributions during the working years. In addition, we will make the CPF system more progressive, by increasing the Extra Interest feature for smaller CPF balances for older Singaporeans. Second, we will introduce the Silver Support scheme. It will help Singaporeans who end up with much less resources than others in their retirement years. It will supplement their incomes, just as Workfare provides systematic top-ups to the incomes of the bottom 20% to 30% of Singaporeans when they are working. Silver Support will complement Workfare as part of the fourth pillar of our social security system.”
“We have also increased subsidies significantly at our public healthcare institutions for all lower- and middle-income Singaporeans, besides our Pioneers. MediShield Life will now give all Singaporeans protection against large medical bills and here, too, we have introduced substantial Government support. We are also allowing greater flexibility in how Medisave can be used, to reduce out-of-pocket costs. The fourth pillar, Workfare. We introduced it in 2007 to supplement the income and savings of low-wage workers, and hence mitigate inequality. We have enhanced it twice since. Through Workfare, an older low-income worker can receive up to 3.5 months of additional income annually, in his CPF and in cash – 3.5 months on top of what his employer pays him, through Workfare. Each of these four pillars of our social security system – housing, CPF, healthcare assurance and Workfare – seeks to preserve an ethic of work, personal effort and responsibility for the family. We should take care, in all our social policies, not to erode this Singaporean ethic. But the four pillars also reflect collective responsibility. We have strengthened the Government's redistributive role within each pillar in recent years, to benefit lower- and middle-income Singaporeans. Let me give you an example of the CPF pillar. With our current Workfare and housing grant schemes, and the extra 1% interest on the first $60,000 of CPF balances, the Government is effectively contributing to a significant accumulation of savings for the lower-income worker. So, in each of the pillars, we are reinforcing personal responsibility and family responsibility, but we are also injecting Government redistribution, taking collective responsibility.”
“The first strength of our social security system is that the vast majority of Singaporean households are homeowners. And over 80% of our lower-income households, those in the bottom 20% of incomes own their homes. However, many are asset-rich and cash-poor in retirement, which is a problem if their children are not supporting them. We want to help them get cash out of their homes, and have strengthened our schemes for this purpose. But high home ownership in Singapore is a major advantage compared to many other countries, where lower-income retirees often struggle with rental payments. Even in the US, which has one of the highest home ownership rates amongst the advanced countries, less than 40% of households in the lower-income group, those in the bottom 20%, today own their homes. That is less than half of what we see in Singapore. We have enhanced this housing pillar in the last few years. We have increased housing grants to ensure that middle- and lower-income couples can afford their first homes. Second pillar, the CPF system. In its early days, when most Singaporeans did not own homes and wages were low, the CPF worked more like a savings scheme for home ownership. Page: 44 From the 1980s, we began rebalancing the CPF system towards retirement and healthcare needs. In recent years, we raised interest rates on the Special and Retirement Accounts, and introduced an extra 1% interest to benefit the lower- and middle-income groups. With growing life expectancy, we introduced CPF LIFE to provide assurance of lifelong payouts. Third pillar, healthcare assurance. Affordable, quality healthcare is critical as we grow older. Our Pioneers now get added lifelong assurance.”
“Second, we will extend the scope of IE Singapore's Internationalisation Finance Scheme to support M&A that will aid a company's overseas expansion. These enhancements will cost the Government over $100 million over five years. The Minister for Trade and Industry will provide more details on the various enhancements we are making to our grant schemes and financing incentives at the Committee of Supply. [Please refer to Annex A-4.] I will now highlight a few tax changes to preserve our competitiveness in the maritime and financial sectors. [Please to Annex A-6]. Page: 43 I will extend the Maritime Sector Incentive which promotes the growth of Singapore as an International Maritime Centre. To support the listing of REITs in Singapore, I will extend the income tax and GST concessions for five years and enhance the GST concession to facilitate fundraising by special purpose vehicles set up by REITs. However, the stamp duty concessions, which are mainly for the purchase of local properties, will be allowed to lapse after 31 March 2015. The concessions were intended to enable the industry to acquire a critical mass of local assets, as a base from which the REITs can expand abroad. This has been achieved. Overall, Singapore's tax regime for REITs continues to remain very competitive relative to those elsewhere in Asia and will help anchor the sustainable growth of the S-REIT industry. Mdm Speaker, I will now move on to a key plank of this year's Budget, which aims to provide Singaporeans with greater assurance in retirement. We have been systematically strengthening our social security system. Together, the four pillars of the system – home ownership, CPF, healthcare assurance and Workfare – are significantly enhanced compared to a decade ago. The first pillar, home ownership.”
“Second, I will enhance the Double Tax Deduction for Internationalisation scheme to cover salaries incurred for Singaporeans posted overseas. This will provide greater support Page: 42 to companies venturing overseas, by co-sharing their risks and their initial costs of expanding overseas, as well as creating skilled jobs for Singaporeans. Third, I will introduce a new tax incentive, the International Growth Scheme or IGS, to provide support to meet the needs of larger Singapore companies in their internationalisation efforts. Qualifying companies will enjoy a 10% concessionary tax rate on their incremental income from qualifying activities. It will encourage more Singapore companies to expand overseas, while anchoring their key business activities and HQs in Singapore. In total, these three enhancements to our schemes for internationalisation are expected to cost $240 million. Finally, we will help spur mergers and acquisitions or M&As. They are a useful strategy for many companies to acquire scale, attract talent and compete effectively overseas. First, I will increase the tax allowance for acquisition costs from the current 5% to 25% of the value of the acquisition. Companies would be able to claim M&A benefits for acquisitions resulting in at least 20% shareholding in the target company, down from the current threshold of 50% shareholding. So, there are two changes. First, increasing the tax allowance from 5% to 25%; and second, reducing the minimum shareholding requirement from 50% down to 20%. This will be especially helpful for SMEs, who may not be able to acquire large stakes in their expansion strategies. I will also extend the M&A scheme which we introduced in 2010 for another five years.”
“The third prong of our support for innovation is catalysing financing to ensure that good, promising companies have access to the capital that they need to grow. First, we want to reduce early-stage funding gaps for startups. We will increase the co-investment cap for SPRING's Startup Enterprise Development Scheme and Business Angel Scheme to catalyse more funds for startups with greater funding needs. We will also top up the Business Angel Scheme to partner more angel investors with experience in nurturing innovative startups. Second, we will pilot a venture debt risk-sharing programme with selected financial institutions. This programme aims to provide high growth companies with an alternative to equity financing and traditional bank loans. Venture debt typically requires minimal collateral as lenders instead receive equity options to share in the company's future growth. This new method of financing, in between equity financing and traditional bank financing, is worth trying. This new method which we will try, venture debt financing, is somewhere between equity financing and traditional bank financing. SPRING will provide 50% risk-sharing with selected financial institutions for such loans over an initial period of two years. Over this period, we aim to catalyse about 100 venture debt loans, totalling approximately $500 million. Next, internationalisation. Supporting our companies to internationalise is a key strategy to help them grow revenues. First, we will raise the support level for SMEs for all activities under IE Singapore's grant schemes from 50% to 70% for three years. We anticipate that this will benefit about 700 projects.”
“So, the existing CDG scheme remains in place, but we are introducing a lower tier, based on $30,000, with very simplified procedures, easy application and flexible approval. We will also promote industry collaborations. We will expand SPRING's Collaborative Industry Projects which incentivises industry players and partners, such as trade associations to work with SMEs to develop productive and innovative solutions that are scalable across the industry. This is very important work with the industry associations. We will also extend and enhance the PACT or Partnerships for Capability Transformation scheme to foster collaboration between large companies and SMEs in their supply chain. Next, we will support companies in creating and capturing greater value from R&D. Local electronics manufacturer Dou Yee International is a good example. From a small trading business, it has transformed itself into a dominant player in the electrostatic materials industry with an annual turnover of $300 million. It did this through R&D and a longstanding partnership with A*STAR. Most recently, Dou Yee has worked with A*STAR to develop smart plastic packaging that extends the freshness and shelf-life of food. Page: 41 Since 2011, our public investments in R&D have catalysed $8.6 billion of industry R&D, supported approximately 400 startups and generated 800 licences. All this coming out of public sector R&D. In our next Research, Innovation and Enterprise five-year plan, we will step up efforts to help companies develop, test and commercialise new products and solutions. More details will be provided later in the year. We must continue to invest in R&D to enhance the long-term potential of our economy. To fund future efforts, I will top up the National Research Fund by $1 billion this year.”
“Let me now explain how we will strengthen our support for innovation, internationalisation, as well as mergers and acquisitions. We will strengthen grant support for every form of innovation. We will also help firms capture greater value from R&D and we will catalyse enterprise financing, which can be especially useful for small businesses attempting breakthroughs. Page: 40 We recognise that bringing about innovation involves a range of activities, from technology research to product development, process improvements, or creation of new brands and marketing efforts. For most SMEs, innovation will often not come in the form of major technological breakthroughs, but in other forms of innovations that are nonetheless significant. We have considered how to best lend support to these innovations, besides our existing PIC and R&D tax measures. We will make it easier for SMEs who are engaging in innovation to apply to SPRING for Capability Development Grants or CDG. We will enhance the CDG scheme, which supports a wide range of innovation activities from developing intellectual properties to new brands. It is a flexible and customisable grant which takes into consideration each SME's unique circumstances and the scope of its project. To make the CDG more accessible to companies, we will simplify the application process for projects below $30,000. We will also extend the enhanced funding support level, of up to 70% of costs, for three more years, to 31 March 2018. The CDG scheme already supports 1,200 projects a year and we want to grow this number. We are not setting an upper limit for the number of projects to support, but estimate that the enhanced CDG scheme will cost us approximately $600 million in total over the next three years.”
“We will, therefore, keep the current levy rates unchanged for two more years – 2015 and 2016 – for Work Permit holders in the Manufacturing sector. In other words, the 2014 rates will remain in place for another two years. For the Construction sector, we want to encourage firms to hire and retain more productive, higher skilled workers, or what is called "R1" workers. Therefore, in addition to deferring this year's levy increases to next year, we will make two further adjustments to Work Permit holder levies over 2015 to 2017. Details on these changes are in the Annex. [Please refer to Annex A-5.] Our basic approach remains unchanged. We have to stay the course in reducing reliance on labour and especially unskilled foreign workers. However, we will continue to calibrate our foreign worker policies as informed by evidence on the pace of inflows, the quality of workers employed, and the progress being made in raising productivity, sector by sector. Through the incentives and grants that we provide businesses to help them upgrade and innovate, the Government will continue to flow back to businesses more resources than the additional foreign worker levies that we have been collecting as a result of the tightening that began in 2010. We are collecting more revenues because of the tightening of foreign worker levies, but we are more than flowing it back to the businesses. Most of this support is targeted at our SMEs. This year alone, the amount that we will flow back to our SMEs is expected to be more than one-and-a-half times the additional foreign worker levies that they will pay. But some companies will benefit far more than others, and these are the companies which innovate and take advantage of government schemes.”